Natural gas price outlook: still cheap

Last winter, at the height of the polar vortex, skyrocketing demand sent the spot market price of natural gas in the Northeast through the roof.

Most residential customers didn't notice because their bills are kept level and their gas kept flowing by state laws that require utilities such as UGI Gas to make sure there is enough natural gas in the system to keep their heaters churning away, even on the coldest of days.

But some large industrial companies, public schools and power plant operators that gambled with so-called interruptable contracts that offer low prices but not guaranteed service, got stuck paying high prices for spot market gas, or switching to expensive back-up systems such as heating oil.

In some cases, that trickled down to power customers who had variable rate contracts with alternative power suppliers who were forced to obtain their electricity from those same plants that bought the gas at those high spot prices.

It could happen again this winter, said Anthony Cox, director of midstream business development for UGI Energy Services, a member of a consortium of companies that is pitching a new natural gas transmission line that would stretch 105 miles from Wilkes Barre, through Northampton County, to Trenton, N.J.

"It's not going to be better this winter, it's going to be worse," Cox said Tuesday at a forum on Natural Gas Prices sponsored by UGI and the America's Natural Gas Alliance.

Heading into this winter, which some forecasters say may be as cold and snowy as the last, the supply of natural gas in the region is no better than it was last year, Cox said, while demand continues to rise as the company signs of thousands of new customers each year, drawn by low prices.

There are a number of new transmission lines on the drawing board, including the company's proposed PennEast Pipeline that could help shore up the supply to meet growing demand for natural gas in time, but most of them are at least a year away, he said.

There has been some improvement over last year, said Amy Farrell, vice president of market development for America's Natural Gas Alliance, who also addressed the meeting, held at SteelStacks in Bethlehem.

Power plants and other large industrial users have improved weatherization efforts, she said, meaning they have taken steps to prepare their plants for extreme cold temperatures by securing alternative fuels or making sure facilities are tuned up for cold conditions.

"A lot of people are focused on that and that will improve," she said.

Production of natural gas is expected to increase 4 percent over the winter months, while liquid natural gas reserves, which are tapped when supplies of produced gas are running low, are close to levels heading into the previous winter. That's not to say additional pipelines aren't needed, she said.

"We still do need some infrastructure, but a lot of things have been done since last winter," she said.

Over the long term, natural gas prices should remain low, Farrell said, citing projections by the U.S. Energy Information Administration that they will stay below $6 per million cubic feet well into the next decade.

That would be good news for business development in the Lehigh Valley, said Don Cunningham, President and CEO of the Lehigh Valley Economic Development Corp. Inexpensive and accessible natural gas will continue to be critical to luring industrial employers, he said.

"We're not a Marcellus Shale region, but access to abundant and affordable natural gas has been a huge part of our industrial growth," he said, kicking off the forum.